Draft Compensation (Claims Management Services) Regulations 2006

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Mr. Bellingham: My hon. Friend’s example illustrates the point. The trade unions now rightly offer their members a wide range of services, and there are many examples of trade unions taking up claims on behalf of individuals. One could argue that the trade unions come within a totally separate legislative framework, and I am prepared to debate that with the Minister because I should like to hear her view. My hon. Friend the Member for Hertsmere has mentioned the miners’ compensation saga, and I understand that a very large number of claims were entered by the trade unions—two unions in particular—which were then passed on to a number of law firms. As we know, the costs incurred by some of those law firms were huge, but the law firms were dealing with applicants, plaintiffs and defendants outwith the scope of the 2006 Act, whereas trade unions should be within that scope.
Mr. Douglas Carswell (Harwich) (Con): Should there not be something on how trade unions use public money under the so-called modernisation fund that derives from the Employment Act 2005? Should they not be held to account for their use of public money?
Mr. Bob Laxton (Derby, North) (Lab): Will the hon. Gentleman accept that there is a wealth of difference between what he is talking about and ambulance chasers stopping people in the street? I am sure that in the hon. Gentleman’s constituency, just as in mine, people are stopped in the street by persons with clipboards asking, “Have you fallen over? Have you had an accident? Do you want to make a claim?” There is a wealth of difference between that and the way in which trade unions operate. The unions have an occupational interest and know the industry with which they are involved; they are often approached by individual members regarding some occupational disease, for example, and know full well about the background. That is different from the cold calling and ambulance chasing that goes off throughout the land.
Mr. Bellingham: The hon. Member for Derby, North has put a plausible, fair point.
Mr. Laxton: As always.
Mr. Bellingham: Of course. However, my point is that two factors need looking at. First, the trade unions now have a substantial amount of extra public money for investigating claims. Secondly, law firms are outwith the scope of the regulations.
Simon Hughes: On a point of order, Mr. Chairman. I understand that a draft order dealing with that is coming soon. The trade union matter is not in any of the orders that we are discussing and we could have a long debate about it, because it is controversial. Perhaps you could make it clear, Mr. Jones, that that is not the subject of any of the orders.
The Chairman: I was about to make that clear. However, since we are dealing with claims generally, I think that I shall allow a little bit more discussion.
Mr. Bellingham: I am grateful, Mr. Jones. I shall draw my remarks to a close.
Mr. Clappison: I am surprised that the Liberal Democrats are taking such a cavalier approach towards the protection of consumers, but there we are. Does my hon. Friend agree that the important thing is protecting the person who wants to make a claim? There may be differences in the standards used by the people making the claim on their behalf, but surely the regulations should go as far as possible to protect consumers. It is surprising that the Liberal Democrats do not share that wish.
Mr. Bellingham: The Minister has said on a number of occasions that the regulations are about consumers and individuals who are concerned about their health, a personal injury, an accident at work or whatever, and who are at their most vulnerable. If someone is about to pursue a claim of any kind, they will be at their most vulnerable and will need the most protection.
We argued about the 2006 Act when it was before Parliament, but now it has been enacted, it is important that the regulations work properly and fairly and that consumers have confidence in them. I hope that the Minister will answer my specific questions, and we shall do our level best to make the legislation work properly.
10.53 am
Simon Hughes: I, too, am happy to serve under your chairmanship, Mr. Jones.
First, I shall deal with the point on which I intervened. I am slightly rising to the bait of the hon. Member for Hertsmere, but I am clear that there is a proper discussion to be had—we have had it before and we will have it again—about who should be exempted from the 2006 Act. There will be debate, and there may even be votes, about whether trade unions should or should not be exempted. I was not shying away from that discussion; I was just trying to assist the Committee to have a shorter sitting than it might have had if there were a great debate about the trade unions.
May I ask the Minister to say, given that the draft compensation exemption order has been prepared, when she intends it to be discussed in the House? Obviously, the relevant part of the 2006 Act cannot come into force and an order cannot be introduced before the draft orders have been debated and approved in both Houses of Parliament.
Will the Minister clarify where we are on the implementation of the Act? I welcome the fact that we have moved quickly. My starting point on these issues is the same as that of the hon. Member for North-West Norfolk—one should regulate as little as possible and Britain has far too much regulation. We need as little regulation as possible. The 2006 Act was effectively an umbrella Act, meaning that the substantive legislation is to come by way of secondary legislation, so the die is cast as a result of what we did earlier in the year and in the last Session. I congratulate through the Minister those who worked to produce the regulations quickly, because we want to pass the legislation quickly. People said that there were lots of abuses, and it would have been nonsense had we waited a year for the regulations to be drafted and brought before Parliament for approval.
On implementation, section 3 of the 2006 Act, which deals with mesothelioma, came into force immediately, and we debated that measure, which we wanted to happen. I am not clear whether the commencement date orders and ministerial decisions have been made about the rest of the Act, and I would be grateful if the Minister could tell me whether they have. Now that we have set off down this road, we need the system to come into operation as soon as possible.
I am conscious that I have touched on some points that are only indirectly linked to the matter before us. However, I would like to make a few more points. I gather that the trade union code of practice, which isto be covered by regulations, is in draft form. If so,will the Minister show interested colleagues in the Committee the latest draft so that we can save time by reducing the number of questions when we return to look at it?
Part 3 of the regulations states that it is a
“criterion for the grant of an application for authorisation that—
(a) in the case of ... a body corporate, each of the applicant’s directors;
(b) in the case of ... a partnership ... each of its members; and
(c) each other person who appears to the Regulator to be able to exert significant influence on the applicant’s policy or management;
is suitable to be associated with the provision of regulated claims management services of the kind to which the applications relates.”
That means that when the application is made, the suitability of the individual is checked, which is a perfectly proper process.
A valid question has been raised about whether the definition of “associate” is appropriate or too wide. I do not have a hard view, but clearly we do not want to catch most people, but fail to catch others. I would be grateful if the Minister could say whether that is a considered definition, because I am told that it is much wider than, for example, the legal definition of a “shadow director”. Other definitions in companies legislation are slightly tighter as well.
This is a bit like the debate on terrorism when we discussed whether there was a danger that a person who turned up at a meeting at which somebody was talking about or inciting people to commit terrorist acts might be caught simply by being there. A valid point has been made that somebody who is
“suitable to be associated with a provision of...services”
is a very wide definition. I wonder whether it is too wide, and I should be grateful for the Minister’s response.
I am concerned that two conditions in the draft have been unreasonably removed from the final regulations. The Minister obviously cannot amend regulations as they appear before us, but I wonder whether we could look again at the authorisation conditions relating to those who carry out this sort of business. The proposal that people who want to do so should supply audited accounts seems to have been lost. One way of showing that a business is valid and that it has behaved properly is for it to register with and submit audited accounts to Companies House. I wonder why that requirement has been dropped.
The second condition is even more important. The requirement in the draft to have a complaints handling procedure has been dropped, but that is imperative as a prerequisite for authorisation. There is a code of practice on complaints handling and related rules, and if consumers have a complaint about an approved organisation that has passed that test, they should know that there is a publicly available complaints handling process.
On part 6, unless I have missed something, I have not seen a draft code of practice. If such a document exists, will the Minister please tell us, and can we see it? The principles set out in a submission from the British Insurance Brokers Association, which members of the Committee, including the Minister and her officials, will have received, set out the following principles—principle 1, integrity; principle 5, market conduct; and principle 6, customers’ interest. Those principles might be used as a model for a code of practice.
Part 10, which concerns me most, states that the regulator can cancel, suspend or vary an authorised person’s authorisation to the extent necessary to protect the public, but that such a cancellation, suspension or variation does not take effect until the end of the period within which the matter may be referred to the tribunal. I make the obvious point that if a rogue business is ripping off the public, the danger of saying that it cannot be suspended until it has been to the tribunal means that it can go on ripping off the public.
There is a fine balance to strike between the freedom to trade on one hand and consumer protection on the other, but if the regulator and his team think that someone is behaving inappropriately, the best practice is to suspend that person until the tribunal has dealt with them, as happens when someone is in employment, and to have a limit on the time between the two so that there is no long period of uncertainty. Is there some way in which we can consider an earlier suspension or a guaranteed maximum time—a short period such as, for example, a month—so that if there is a complaint, there is no risk of consumers losing out in the interim?
On the Compensation (Specification of Benefits) Order 2006, I asked whether other benefits can be included, and I understood from the Minister’s answer that although the order currently includes only one type of benefit, the Minister has not ruled out claims farming for other benefits included elsewhere. If this proposal is agreed, will those who hold themselves out as helping people with their criminal injuries claims be covered? That was not clear to me.
The National Accident Helpline, which we all know and love from debates in Committee and in the Chamber, has asked two good questions. First, will the Minister guarantee that garages and body shops that pass on referrals for a fee, reward or gain will be covered, and if not, why not? The second question relates to regulation 12(5)(c), which is concerned with tied agents and people who act as single business people by performing the work and then feeding it back to the company:
“Can the Minister explain why a requirement for individuals to seek authorisation is impractical?”
I understand that the regulations say that if I am an authorised business under the 2006 Act, and if I receive business from an individual who knocks on doorsand gets business for me, I am responsible for that individual—but will that work? The concern is that it is much more difficult to police such individuals if they need not be approved. Should such individuals be approved? I do not have a hard and fast opinion, butit is a valid question. It is pointless having good regulations under a good Act and then discovering that a few people can escape the system.
11.6 am
Bridget Prentice: I shall try to answer all the questions that have been asked in as much detail as possible, and if I miss anything I shall write to the Committee in more detail.
The hon. Member for North-West Norfolk has mentioned the status of the regulator. As he pointed out, under the current system the interim regulator will be the Secretary of State. We have appointed Mark Boleat as head of regulation, and Staffordshire county council’s trading standards unit will run the monitoring and compliance unit. Regulation by the Secretary of State is an interim measure, because the Legal Services Bill, which I believe will receive its Second Reading in the other place tomorrow, will establish a new framework for legal services regulation and set up the legal services board and the office for legal complaints. We intend that claims management regulation will then become an integrated part of that new structure. I hope that that answers the hon. Gentleman’s question.
The hon. Gentleman also mentioned the comments made by the Better Regulation Task Force. It is true that the industry was given the opportunity to self-regulate, but that attempt failed. One reason for the failure was insufficient buy-in from the industry itself, and we felt that we had to act reasonably quickly and establish a statutory structure. The Better Regulation Task Force recommended that that should happen by December last year in the absence of sufficient progress.
The hon. Gentleman also asked when and where the consultation took place. I cannot give him the cost now, but I will obtain the figures. There were four consultation meetings in Newcastle, Manchester, Bristol and London. I am sorry to say that there were no meetings in Norfolk or Suffolk, although the reason why—the consultation took place in the summer—is beyond me. We have just published the summary of the responses, and 74 representatives from 57 companies attended the meetings. There have also been regular meetings of the regulatory consultative group, which has representatives from the industry, from solicitors, from the insurance industry and from consumer groups.
On fees and their effect on the industry, it is indeed our intention that claims management regulation should be self-funded. However, in the short term—with uncertainty on the numbers who will come forward for authorisation—we recognise that we must provide start-up funding, and we intend to do so. It is imperative that funding arrangements are in place to enable the 2006 Act to be implemented in a timely fashion, so that consumers can be protected, and we intend fees to be reasonable and proportionate. The regulatory impact assessment examined the impact on small business, and the Federation of Small Businesses has been specifically consulted and supports regulation of the sector. We have published draft fee rules setting out the charging regime, and I shall ensure that members of the Committee see a copy of it.
The hon. Gentleman asked an important question about search warrants. We must always consider seriously whether to extend search powers, but the problem is that many claims management firms are sole traders, often working from home. We therefore felt it necessary to allow search warrants in limited circumstances to ensure that the regulations can effectively be enforced. The powers are modelled on those in the Police and Criminal Evidence Act 1984, and they are general warrant powers with the same time limits as under that Act.
We had a short play-within-a-play debate on the role of trade unions. As the hon. Member for North Southwark and Bermondsey pointed out, we will have the opportunity to deal with the matter in some detail soon, so I do not want to get too involved in it now. However, I say to the hon. Member for North-West Norfolk that trade unions are within the scope of the regulations, but they will have some exemptions. We will go into that in more detail on another occasion.
The hon. Member for North Southwark and Bermondsey asked a number of questions and kindly asked me to pass on my congratulations on the speed with which the regulations were put together. I fully endorse those comments, and I will ensure that everyone concerned receives those congratulations. He asked me whether other sectors are being considered. The answer is that they are, insofar as if there seems to be a problem in another sector, it can be brought within the scope of the 1984 Act. I assure the hon. Gentleman that claims under the criminal injuries compensation scheme are brought within the scope of the 2006 Act by the scope order. Other matters, such as property damage claims, were considered, but we decided that there was not enough evidence to suggest that there was a major problem. However, we will keep that under review.
The hon. Gentleman also asked about the effect of the regulations in Scotland and Northern Ireland. We had good consultation and discussions with Scotland and Northern Ireland, particularly with the Scottish Executive. There are two reasons for the extent of the regulations: first, the law is slightly different in Scotland; and secondly, the Scottish Executive said that there was little evidence of any problem in Scotland and that they did not feel that there was a need to introduce statutory regulations. The same is true in Northern Ireland—somebody might want to research why that is the case—but should problems arise, Scotland and Northern Ireland will have the power to introduce their own legislation.
I want to make it clear that if someone living in England were to use a claims management firm based in Scotland, then because the consumer concerned was in England, they would be able to use the powers in question to bring their case in England. I hope that that answers the hon. Gentleman’s question.
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